Tax credits: Welfare and tax bodies write to MPs to call for fairness

Published on 14 January 2005

When the Revenue make an error and overpay tax credits, this debt can be written off if it is reasonable for the individual to have thought that their award was correct. Welfare and tax bodies have been unhappy that the Revenue seem to expect tax credit claimants to have a greater understanding of the tax credit system and award notices than is realistic.

John Andrews, the Chairman of LITRG, has therefore written to MPs on behalf of the Tax Credits Co-ordinating Group (see below) to ask that MPs should press for a more generous approach from the Revenue until such time as the award notices are re-designed and the system better understood.

Earlier this month the Paymaster General stated in Parliament that, by the end of December 2004 some 78,000 people had requested write-offs of their overpayment, some 41,000 had been decided, but only 1,600 families had been granted a write-off at that time.

Welfare and tax bodies have seen increasing numbers of cases where the Revenue have refused to write off amounts because they claim the tax credit claimant should have known that what they were getting was too much.

But the award notices are not easy to understand and the responsiveness of the system means that changes often happen with bewildering frequency.

To illustrate this point, in December, the Ombudsman said to a Select Committee:

'If you have six different award notices and you have no real idea which of those, if any, is right, having a debate about whether you reasonably believed that that was the right figure is not helpful in those circumstances.'

John Andrews commented:

'While the Revenue are deciding whether to write off the overpayment, tax credits may be severely curtailed or stopped altogether. This in itself can create great hardship. If the write-off is ultimately refused, the family can be plunged into further and deeper poverty and the recovery can last for several years.'

There is a case for an independent audit of Revenue refusals to write off overpayments, to ensure that a 'real world' understanding of what families should be expected to know is applied. It would also be interesting to see whether favourable decisions are more prevalent where welfare/tax bodies or MPs have become involved.

All the representative bodies are concerned that the processes involved in getting matters reviewed are just too intimidating or complex for some people, so that the 78,000 figure mentioned earlier may only be the tip of an iceberg of cases deserving review.

The Revenue have taken on board criticism of their award notices and are in the midst of a major re-design. Also, they have recently issued Helpsheet TC602PE to explain entries in the payment section of the award notice (but the Helpsheet itself is an intimidating document for many and does not cover all scenarios).

Until such time as improvements to the award notices and easily available explanations, both in print and on the Revenue website, have been made, the members of the Tax Credits Co-ordinating Group want to see a generous approach, with families getting the benefit of any doubt.

The Tax Credits Co-ordinating Group is a group of welfare rights and tax professional bodies, who represent tax credit claimants and those that advise them. Members of the Group are the Chartered Institute of Taxation, Child Poverty Action Group, Citizens Advice, the Institute of Chartered Accountants in England & Wales, Low Incomes Tax Reform Group, One Parent Families, TaxAid.


Contact Name: John Andrews (Contact tel: 0844 579 6700; fax: 0844 579 6701)

Relevant Link: TC602PE